The accounting profession is currently experimenting with financial statements adjusted
for the changing value of the dollar since inflation is increasing.
a. True
b. False
Under the periodic inventory system, a physical inventory must be taken at the end of
the period to determine cost of goods sold.
a. True
b. False
Connor Martin Corporation’s balance sheet showed the following amounts: Current
Liabilities, $10,000; Bonds Payable, $3,000; Lease Obligations, $4,000; and
Notes Payable, $600. Total stockholders’ equity was $12,000. The debt-to-equity ratio
is:
a. 0.83.
b. 1.47.
c. 1.42.
d. 0.63.
If a change in accounts payable was added back to net income on the statement of cash
flows prepared using the indirect method, then the amount owed to suppliers during the
period had decreased.
a. True
b. False
On January 1, 2014, the Accounts Receivable and the Allowance for Uncollectible
Accounts for Darius Company carried balances of $20,000 and $550 respectively.
During the year, the company reported $70,000 of credit sales. There were $400 of
receivables written off as uncollectible in 2014. Cash collections of receivables
amounted to $74,700. The company estimates that it will be unable to collect 5% of the
year-end accounts receivable balance. The amount of bad debts expense recognized in
the 2014 income statement will be:
a. $545
b. $595
c. $745
d. $795
a. A liability resulting from the signing of a promissory note.
b. A measure of how long it takes to collect receivables.
c. A written promise to repay a definite sum of money on demand or at a fixed or
determinable date in the future.
d. The length of time a note is outstanding, that is, the period of time between the date it
is issued and the date it matures.
e. The party that will receive the money from a promissory note at some future date.
f. The process of selling a promissory note.
g. The date the promissory note is due.
h. The amount of cash the maker is to pay the payee on the maturity date of the note.
i. The difference between the principal amount of the note and its maturity value.
j. An asset resulting from the acceptance of a promissory note from another company.
k. Securities issued by corporations and governmental bodies as a form of borrowing.
l. Securities issued by corporations as a form of ownership in the business.
m. The party that agrees to repay the money for a promissory note at some future date.
n. The amount of cash received, or the fair value of the products or services received,
by the maker when a promissory note is issued.
Promissory note
In preparing the financial statements for December 31, 2015, an accountant improperly
classified the payment of prepaid rent as rent expense. Which of the following amounts
would not be affected by this improper classification?
a. Retained earnings, January 1, 2015
b. Retained earnings, December 31, 2015
c. Net income
d. Total assets
Closing entries serve two important purposes: (1) to return the balances in all temporary
or nominal accounts to zero to start the next accounting period and (2) to transfer the
net income (or net loss) and the dividends of the period to the Retained Earnings
account.
a. True
b. False
Issuance of stock results in cash inflows that appear in the financing section of the
statement of cash flows.
a. True
b. False
An investor views a high debtÂtoÂequity ratio and a low times interest earned as a
favorable sign of a company’s abilities to meet its long-term obligations.
a. True
b. False
Lamar Company has total current assets of $122,000 and total current liabilities of
$57,000. What is the amount of working capital for Lamar Company?
a. $ 57,000
b. $ 65,000
c. $ 122,000
d. $ 179,000
A company forgot to record four adjustments during 2013. Which one of the following
omissions of adjustments will understate net income?
a. Sales made during the last week of the period are not recorded.
b. Interest on monies borrowed has not yet been recorded.
c. Prepaid insurance is not reduced for the portion of the policy that has expired during
the period.
d. Income taxes owed but not yet paid are ignored.
Debenture bonds are backed by specific collateral of the issuing company.
a. True
b. False
MusicCorporationThe data below is for Music Corporation for 2015.
Refer to the data for Music Corporation.What is the balance of Accounts Receivable at
December 31, 2015?
a. $336,000
b. $448,400
c. $458,000
d. $466,000
Use the following codes to indicate how the cash flow effect, if any, of each transaction
or event would be reported on a statement of cash flows if the operating activities
section is prepared using the indirect method.
a. Operating activity-add to net income
b. Operating activity-deduct from net income
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
Reissued treasury stock.
The primary reason for a stock split is to
a. distribute cash to the investor.
b. decrease the market value of the stock.
c. decrease the number of shares outstanding.
d. increase the contributed capital of the corporation.
Which financial statement reports the sources and uses of an entity’s cash resources?
a. Income statement
b. Statement of retained earnings
c. Balance sheet
d. Statement of cash flows
Lasiter Corp. reported net credit sales of $2,000,000 and cost of goods sold of
$1,400,000 for 2014. On January 1, 2014, accounts receivable was $250,000. Amounts
owed by customers increased by $20,000 during 2014. Rounding to two decimal places,
what is Lasiter’s accounts receivable turnover rate for 2014?
a. 8.33
b. 8.00
c. 7.69
d. 7.41